Spring Home Sales
Start Strong
Key
Forecast Is Revised Upward, Despite Pockets of
Weakness; Rebounds in the O.C. and Boston
By
RUTH SIMON
Staff Reporter of THE WALL STREET JOURNAL
April 19, 2005; Page D1
After a multiyear
real-estate boom that has raised concerns about a
housing bubble in a number of markets, economists
and homeowners are closely watching this year's
spring selling season for any signs of a slowdown.
So far, there aren't
many of them.
Spring tends to be the
hottest selling season, with families looking to
move well before the start of the next school year.
And sales are getting off to a strong start in many
parts of the country.
In a revised forecast,
the National Association of Realtors now says it
expects sales of existing single-family homes to
fall 2.4% to 6.62 million for the full year, which
still would be the second-highest level on record.
That is better than the 5% slide the Realtors group
predicted at the start of the year.
One reason: The
much-anticipated increase in long-term mortgage
rates has yet to materialize. Weak economic news has
helped push rates on 30-year fixed-rate mortgages
below 6%, from a recent high of 6.17%, according to
HSH Associates, providing a nudge to buyers fearful
that rates will shoot up again.
The brisk start to the
season comes as concerns about the housing market
have been escalating. In a speech yesterday, Federal
Reserve Governor Susan Bies said, "We are beginning
to see signs that housing prices may be reaching a
peak in some markets." She cited the growing share
of homes purchased by investors, and the large
number of borrowers using adjustable-rate,
interest-only mortgages in an effort to make
high-priced homes more affordable.
Additionally, there is evidence of a weakening in
certain corners of the market. In the luxury market,
for instance, "what we're finding is that properties
that sold...in the first quarter of 2005 seem to be
on the market longer" in a number of locales, says
Stuart Siegel, president of Sotheby's International
Realty, a unit of
Cendant
Corp., blaming the "net impact of sticker shock."
There were signs last
fall that the housing market, at long last, was
beginning to soften in such places as Orange County,
Calif., and Boston. Real-estate brokers say business
picked up in many markets after a brief slowdown,
helped along by declining mortgage rates. In some
local markets, improving economic conditions have
played a role. In Atlanta, corporate relocations
plus a sense of increased job security have helped
boost sales of homes priced at more than $1 million,
says Chris Ballard, broker-owner of Century 21 Gold
Medal Realty.
In
some markets, such as Phoenix and Newport News, Va.,
real-estate brokers say sales are stronger this year
than last. In some cases, homes are flying off the
market within days or even hours of being listed.
Brokers in some markets say the rise in sales that
normally arrives with spring began earlier this
year.
The likelihood of yet
another frenzied spring comes on top of record sales
last year. Fueled by low mortgage rates, sales of
existing homes hit 6.78 million, topping a record of
6.18 million in 2003, according to the National
Association of Realtors. Home prices climbed more
than 20% last year in Miami, Las Vegas, Phoenix, Los
Angeles and Washington, D.C., among other markets.
Economists generally
agree that price gains will slow to more normal
levels, though just when this will happen -- and how
deep the slowdown will be -- remains an open
question. Home-price research company Fiserv CSW
Inc. expects some slowing this year. It forecasts
that home prices will rise an average of 7% to 9%
this year, following last year's 14.3% rise, in the
90 major metropolitan areas it tracks.
Slowdown In Second
Half?
NAR chief economist
David Lereah expects a slowdown in the second half.
So far this year, he says, the number of homes sold
is running about flat compared with last year's
strong showing.
The strong housing
market "will continue as long as interest rates
remain relatively low and credit remains relatively
easy," says Kenneth Rosen, chairman of the Fisher
Center for Real Estate and Urban Economics at the
University of California at Berkeley. But, he adds,
"the longer the boom goes on, the bigger the
correction will be."
In Newport News, Va.,
"it's even more frenzied than it was last year,"
says Liz Moore, president of Liz Moore & Associates,
where sales rose 43% in the first quarter from the
year-earlier period. "If we have a reasonable
listing, we have multiple offers in the first couple
of days -- five to seven isn't unusual," she says.
The supply of
properties for sale is so thin in Manhattan,
meanwhile, that more buyers this year are offering
$100,000 or more above the listed price.
Arlyne Blitz, a vice
president with Corcoran Group, says one of her
clients recently made an all-cash offer that was
$155,000 over the asking price for a two-bedroom,
1,500 square-foot condo priced at $1.35 million in
an arrangement that required would-be buyers to
submit one "best and final" offer.
"We were No. 7 of 17,"
Ms. Blitz says. "The winning bid was for over $1.6
million." Some brokers there are deliberately
underpricing property to elicit greater bidding and
a higher final selling price, she notes.
Properties also are
flying off the market in Phoenix and Tucson, where
an influx of refugees from Southern California and
Las Vegas -- looking for lower-cost housing or
better investment opportunities -- is helping to
propel prices skyward. Last year, the average home
in the Phoenix area stayed on the market for 50 to
60 days, says Bill Jilbert, president of Coldwell
Banker Success Realty. Now, he says, "the pendulum
is so far to one side that it's not even fun."
Six
Hours, Eight Offers
Broker
Tom Weiskopf put his own 3,000-square-foot
four-bedroom home in Scottsdale, Ariz., on the
market in late February. Within six hours he had
eight offers, with most buyers waiving the standard
contingencies for financing, appraisal and
inspection.
Mr.
Weiskopf cut off the bidding at 7 p.m. and accepted
an offer for $645,500, $4,500 above the listed
price.
The
competition among buyers is especially fierce for
entry-level homes. In Long Beach, Calif., "anything
under $500,000 in a decent neighborhood is going to
produce multiple offers," says Richard F. Gaylord, a
broker with Re/Max Real Estate Specialists. Mr.
Gaylord last month received 29 offers on a
1,084-square-foot, three-bedroom starter home that
sold for $510,000, $60,500 more than the asking
price.
Russell
Garron, a pharmaceuticals salesman, initially
offered $455,000 this month for a 1,200-square foot,
three-bedroom condo in Irvine, Calif., listed at
$449,000.
Mr.
Garron upped his offer to $465,000 because there
were multiple bids. When his broker, Tamzi
Richardson of First Team Real Estate, called at
10:30 p.m. that night with the seller's response,
Mr. Garron immediately dashed to Kinko's to fax in
his paperwork. While searching for a home, "I slept
with my cellphone," says Mr. Garron, who lost out on
two other properties.
New Construction
Not
every market is as heated. In Kansas City, the
average time on the market climbed to 57 days in the
first quarter from 49 days during the same period
last year.
"We're
not seeing the rush of multiple offers...[or] sales
coming in well over the list price like we were
seeing last year or the year before," says Jerry
Reece, president of Reece & Nichols there.
In the
bellwether market of San Diego, home prices rose at
an annualized rate of 12.5% in March, down from as
much as 26.4% in October, according to DataQuick
Information Systems, which tracks U.S. real-estate
sales.
Houston
broker Julius F. Zatopek III, of Re/Max on the
Brazos, says sales have softened in that city in
recent weeks after spiking during the first quarter
as buyers dived into the market, nervous about
rising interest rates.
In
Miami, where sales remain strong, resale prices of
existing condos in the $500,000 to $900,000 price
range could fall by as much as $200,000 later this
year, predicts broker Mark Zilbert . With so many
new units coming onto the market, "the motivation is
to be in a hip new property," Mr. Zilbert says. With
existing units, "the value isn't there." |